| Segment Information |
6. Segment
Information
The Company is
a nutrition company that sells a wide range of weight management
products, nutritional supplements and personal care products. The
Company’s products are manufactured by third party providers
and by the Company in its Changsha, Hunan, China extraction
facility, Suzhou, China facility and in its Lake Forest, California
facility, and then are sold to independent distributors who consume
and sell Herbalife products to retail consumers or other
distributors. Revenues reflect sales of products by the Company to
its distributors and are categorized based on geographic
location.
As of
June 30, 2013, the Company sold products in 88 countries
throughout the world and was organized and managed by geographic
regions. The Company aggregates its operating segments, excluding
China, into one reporting segment, or the Primary Reporting
Segment, as management believes that the Company’s operating
segments have similar operating characteristics and similar long
term operating performance. In making this determination,
management believes that the operating segments are similar in the
nature of the products sold, the product acquisition process, the
types of customers to whom products are sold, the methods used to
distribute the products, and the nature of the regulatory
environment. China has been identified as a separate reporting
segment as it does not meet the criteria for aggregation. The
operating information for the Primary Reporting Segment and China,
and sales by product line are as follows:
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Three Months
Ended |
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Six Months
Ended |
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June 30,
2013 |
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June 30,
2012 |
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June 30,
2013 |
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June 30,
2012 |
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(In
millions) |
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Net
Sales:
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Primary Reporting
Segment
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United States
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$ |
241.7 |
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$ |
218.1 |
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$ |
457.9 |
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$ |
422.6 |
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Mexico
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145.6 |
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119.5 |
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278.5 |
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236.6 |
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South Korea
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112.0 |
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112.5 |
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222.0 |
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205.6 |
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Others
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601.9 |
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504.7 |
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1,197.9 |
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997.3 |
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Total Primary Reporting
Segment
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1,101.2 |
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954.8 |
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2,156.3 |
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1,862.1 |
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China
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118.0 |
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77.1 |
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186.6 |
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134.0 |
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Total Net Sales
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$ |
1,219.2 |
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$ |
1,031.9 |
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$ |
2,342.9 |
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$ |
1,996.1 |
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Contribution
Margin(1)(2):
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Primary Reporting
Segment
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United States
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$ |
99.5 |
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$ |
93.6 |
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$ |
194.2 |
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$ |
189.0 |
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Mexico
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64.0 |
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49.0 |
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122.6 |
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92.9 |
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South Korea
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56.4 |
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55.0 |
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111.6 |
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97.0 |
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Others
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266.8 |
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226.1 |
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531.3 |
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444.0 |
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Total Primary Reporting
Segment
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486.7 |
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423.7 |
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959.7 |
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822.9 |
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China
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105.8 |
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69.4 |
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166.3 |
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120.6 |
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Total Contribution
Margin
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$ |
592.5 |
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$ |
493.1 |
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$ |
1,126.0 |
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$ |
943.5 |
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Selling, general and
administrative expenses(2)
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400.1 |
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306.3 |
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764.8 |
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602.7 |
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Interest expense,
net
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5.6 |
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3.2 |
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10.9 |
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4.5 |
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Income before income
taxes
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186.8 |
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183.6 |
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350.3 |
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336.3 |
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Income taxes
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43.6 |
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51.6 |
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88.3 |
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96.4 |
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Net Income
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$ |
143.2 |
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$ |
132.0 |
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$ |
262.0 |
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$ |
239.9 |
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Net sales by product
line:
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Weight
Management
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$ |
778.2 |
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$ |
646.8 |
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$ |
1,489.8 |
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$ |
1,248.6 |
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Targeted
Nutrition
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277.5 |
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241.0 |
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534.4 |
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465.9 |
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Energy, Sports and
Fitness
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65.1 |
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52.5 |
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123.4 |
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100.6 |
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Outer Nutrition
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37.8 |
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37.7 |
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76.0 |
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74.4 |
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Literature, promotional and
other(3)
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60.6 |
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53.9 |
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119.3 |
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106.6 |
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Total Net Sales
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$ |
1,219.2 |
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$ |
1,031.9 |
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$ |
2,342.9 |
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$ |
1,996.1 |
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Net sales by geographic
region:
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North America
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$ |
247.5 |
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$ |
224.7 |
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$ |
469.0 |
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$ |
435.4 |
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Mexico
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145.6 |
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119.5 |
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278.5 |
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236.6 |
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South and Central
America
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222.5 |
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152.5 |
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441.9 |
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318.0 |
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EMEA
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186.4 |
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161.6 |
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355.9 |
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315.6 |
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Asia Pacific
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299.2 |
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296.5 |
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611.0 |
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556.5 |
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China
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118.0 |
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77.1 |
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186.6 |
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134.0 |
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Total Net Sales
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$ |
1,219.2 |
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$ |
1,031.9 |
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$ |
2,342.9 |
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$ |
1,996.1 |
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| (1) |
Contribution margin
consists of net sales less cost of sales and royalty overrides. See
Part I, Item 2 — Management’s Discussion and
Analysis of Financial Condition and Results of Operations in
this Quarterly Report on Form 10-Q for a description of net sales,
cost of sales and royalty overrides. |
| (2) |
Service fees to China
independent service providers totaling $53.2 million and
$33.5 million for the three months ended June 30, 2013
and 2012, respectively, and totaling $84.7 million and
$59.3 million for the six months ended June 30, 2013 and
2012, respectively, are included in selling, general and
administrative expenses while distributor compensation for all
other countries is included in contribution margin. |
| (3) |
Product buybacks and
returns in all product categories are included in the literature,
promotional and other category. |
As of
June 30, 2013 and December 31, 2012, total assets for the
Company’s Primary Reporting Segment were $2,065.7 million and
$1,607.2 million, respectively. Total assets for the China
segment were $188.3 million and $116.9 million as of
June 30, 2013 and December 31, 2012, respectively. As of
June 30, 2013 and December 31, 2012, goodwill allocated
to the Company’s reporting units included in the
Company’s Primary Reporting Segment was $102.4 million for
both periods. Goodwill allocated to the China segment was $3.1
million as of June 30, 2013 and December 31,
2012.
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